Congress Take Action?)

The ball is in the court of The Fed, the Biden administration (HUD) and Congress. Will they take action?

There will be more housing inventory hitting the market soon. As home prices are up and most are no longer in negative equity situations, some will decide to sell into this hot market. Obviously not paying your mortgage for 12, 14, 16, or even 18 months is a nice bonus that party is coming to an end.

Zillow’s research found that most are not going to bring their mortgage current. Assume someone took a forbearance and their monthly mortgage cost was $2,000 per month, some may be behind by up to $36,000 when the forbearance period ends. Okay, well what if you can’t make it current? You can defer the payments to the end of the mortgage but you still owe that and many got used to not even paying the regular monthly payment. So a sizable portion will be selling

Here is Black Knight’s Scheduled Forebearance Plan expirations.

Could this be the end of the 16.6% YoY growth rate in home prices? Or will Congress and/or The Biden Administration extend the forbearance? Or will The Fed expand their balance sheet even further??

Will the Biden Administration come to the rescue?

Consumer Sentiment in U.S. Plunges to Lowest Since 2011 (Good Time To Buy A Home Falls To 30% Share Due To Raging Home Price Growth)

U.S. consumer sentiment fell in early August to the lowest level in nearly a decade as Americans grew more concerned about the economy’s prospects, inflation and the recent surge in coronavirus cases.

The University of Michigan’s preliminary sentiment index fell by 11 points to 70.2, the lowest since December 2011, data released Friday showed. The figure fell well short of all estimates in a Bloomberg survey of economists.

Consumer sentiment in U.S. plunges on concerns about virus, economic prospects

The slump in confidence risks a more pronounced slowing in economic growth in coming months should consumers rein in spending. The recent deterioration in sentiment highlights how rising prices and concerns about the delta variant’s potential impact on the economy are weighing on Americans.

“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end,” Richard Curtin, director of the survey, said in the report.

The expectations gauge plummeted almost 14 points to 65.2, the lowest since October 2013. A measure of consumers’ outlook for the economy over the coming year soured, falling the most since the onset of the pandemic in March 2020.

Only 36% of respondents expect a decline in the jobless rate, down from 52% the prior month, despite record job openings. Consumers also became decidedly downbeat about their income prospects. The gauge of expected personal finances fell to a seven-year low.

Rising prices are having a clear impact on Americans’ budgets, particularly among those with lower or fixed incomes. Nearly a third of those aged 65 or older complained that inflation had lowered their living standards, as did about a fourth of those with incomes in the bottom third or with a high school education or less.

The Michigan report showed buying conditions deteriorated to the lowest since April of last year.

Buying conditions deteriorate sharply for American consumers as prices soar

Yes, only 30% of respondents felt that it was a good time to buy a home. Particularly since home prices are rising at a 16.6% YoY pace, faster even than the peak of the infamous home price bubble of 2005. But this time, The Fed is blowing the bubble, not easy mortgage credit like in 2005.

Apparently, Treasury Secretary Janet Yellen does not inspire confidence in consumers.

Bubble? UMich Buying Conditions For Houses (Good) Collapses To 32%, Fed O/N Reverse Repos Breach $1 Trillion

The University of Michigan survey of consumers is out and their buying conditions for housing (good) was a disasters. Only 32% on consumers view buying conditions for a house as good. That means that 68% think buying conditions are not good. Why? With the Case-Shiller National Home Price Index growing at a scorching 16.6% YoY making housing simply unaffordable for many Americans.

On a different note, The Fed’s overnight reverse repo facility (aka, the slosh” just breached the $1 trillion mark.

Then we have this tantalizing headline on Bloomberg: “Traders Pile Into Tail-Risk Bets That Fed Won’t Hike at All”.

Treasury yields are rising amid optimism over the global recovery but there has been a run on Eurodollar options betting the Federal Reserve will opt not to raise interest rates at all.

Traders this week have been busy snapping up Eurodollar call options on underlying March 2025 futures that target three-month Libor to fix below 0.5%. These pay off if markets price the Fed keeping its benchmark at its lower bound until then. Futures markets are currently anticipating Libor will rise to about 1.47% by the first quarter of 2025.

So, it looks like The Fed (aka, Greenman) may not be going anywhere.

Have a wonderful weekend!

Mortgage Rates Rise to 2.87%, Reaching Highest Level Since July

Mortgage rates in the U.S. surged to the highest level in a month.

The average for a 30-year loan was 2.87%, up from 2.77% last week and the highest since July 15, Freddie Mac said Thursday. Mortgage rates have been below 3% since the beginning of July.